- Homeowners insurance protects your dwelling, personal property, and liability.
- Additionally, homeowners insurance provides loss of use if you need to temporarily relocate.
- Damage to your home or personal belongings by a named event, or peril, is covered.
A home is the biggest asset most Americans have. Homeowners insurance offers protection for your home and personal possessions.
Although homeowners insurance is not required by law, if you have a mortgage, your lender will require it to protect the home. If you live in a disaster-prone area, you may need additional coverage for risks like floods or earthquakes.
Understanding homeowners insurance
Homeowners insurance protects you from financial hardship should you experience a home-related loss.
A standard homeowners insurance will cover your dwelling and your personal belongings, and offer personal liability coverage for injuries that happen on your property. Additionally, homeowners insurance provides "loss of use" if you need to relocate because your home is temporarily unlivable.
Damage to your home and belongings must come from a peril. A peril refers to a specific event that caused damage to your home and belongings. Common insurance perils are:
- Fire or lightning
- Windstorm or hail
- Explosion
- Riots
- Aircraft
- Vehicles
- Smoke
- Vandalism
- Theft
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge or overflow of water or steam
- Sudden and accidental tearing, cracking, burning, or bulging
- Freezing
- Sudden and accidental damage due to short-circuiting
- Volcanic eruption
Dwelling coverage
Dwelling coverage is the part of a homeowners insurance policy that can help cover the cost of repairing or rebuilding your home if it is damaged. Your dwelling consists of your home and any other structures on the property, like a garage or shed. The type of dwelling coverage you have depends on the type of homeowners insurance policy.
Personal property coverage
Your possessions are covered from damage or theft under personal property coverage. There are limits to standard personal property coverage depending on your policy and insurance carrier. Usually your limit will be equal to 50% to 70% of your dwelling coverage.
Specialty items like high-end electronics, expensive jewelry, furs, fine arts, firearms, and cash have specific limits.
Your coverage extends to travel as well. So if you bring a covered item on vacation and it's stolen, your homeowners policy can reimburse you for it up to your limit.
Liability protection
Homeowners insurance offers you personal liability protection if someone is injured at your property or sues for damages. Some carriers offer identity theft and cyber protection as part of their personal liability coverage or as add-on riders.
There are limits to standard personal liability coverage depending on your policy and insurance carrier. Basic personal liability homeowners policies typically have a $100,000 coverage limit.
Certain items like a pool or trampoline can increase your liability as a homeowner. Also, some homeowners insurance policies exclude exotic pets and certain dog breeds. Some homeowners insurance companies will not offer coverage based on the size and breed of the dog, especially large dogs and breeds considered to be aggressive.
Additional living expenses
"Loss of use" coverage, also known as additional living expenses (ALE), is included in most homeowners policies. It provides reimbursement up to a limit — often 20% or 30% of your dwelling coverage, and for a certain amount of time — for temporary housing when a peril causes damage to your property or belongings that makes your home uninhabitable.
Optional coverages and endorsements
Flood insurance
Flood damage associated with a natural disaster is not covered under standard homeowners insurance and requires separate flood insurance.
You may be required to purchase flood insurance by your mortgage lender if you live in a high-risk flood zone. FEMA and the National Flood Insurance Program have a list of insurers offering flood insurance.
Earthquake insurance
Land movement is not a covered peril under standard homeowners insurance. If you live in an area with increased earthquake risk, such as California, you should consider purchasing a separate earthquake insurance policy to cover your home and belongings in the event of an earthquake.
Scheduled personal property
Standard homeowners insurance can offer more coverage for expensive personal items, such as jewelry. But low coverage limits mean the standard coverage usually isn't enough to fully replace or repair expensive jewels.
There are three options to get more coverage for your jewelry: raising your personal property limit, purchasing a floater policy for your homeowners insurance, or purchasing personal jewelry insurance.
Water coverage backup
Like water damage, your homeowners insurance will cover sewer damage related to a named peril as long as you have water backup coverage. If the damage is from sewer backup or a lack of maintenance of the sewer lines, you will not be covered.
Be sure to perform regular maintenance and upkeep to avoid sewer line issues, because homeowners insurance doesn't cover for lack of maintenance. Likewise, talk to your insurance agent about adding the appropriate rider.
Common exclusions in homeowners insurance
The standard homeowners insurance policy will not cover damages caused by an earthquake or flood and protection for valuable jewelry, collectibles, and some electronics based on coverage limits.
Here's a list of common inclusions and exclusions in coverage.
Coverage | Included with homeowners insurance? |
High-end electronics/special jewelry | Limited, requires add-on* |
Equipment breakdown | Yes |
Electrical outage | Yes* |
Service lines | Yes* |
Cyber liability | Yes* |
Water damage | Yes |
Flood | No** |
Wind or hail | Yes, but not high winds*** |
Earthquake | No* |
Pets | Yes* |
Intentional damage | No |
* Available as add-on coverage if not part of policy
**Available through the National Flood Insurance Program and approved insurers
***Windstorm rider may be required in hurricane or tornado areas
How to file a homeowners insurance claim
Documenting the damage
If your home has been damaged, you'll want to take photos and video of the damage. This includes damage to property and strucutral damage.
In the case of theft or vandalism, you'll want to file a police report.
Contacting your insurance provider
Reach out to your insurer immediately, either by phone or online. The claims process will vary by insurer, but you will likely need to provide photos, a detailed inventory of damages, and other verification documents. Be prepared with your policy number.
Claims process and timeline
You will have to fill out a few forms and may have to schedule a visit with an adjuster who will assess the damage. It may be helpful to keep a log throughout the homeowners insurance claims process, listing the dates and times of every phone call you have with the insurance company and notes about the content of the conversation and who you spoke with.
You may have to wait several weeks to a few months to receive a claim settlement offer. Some states require insurance companies to accept or deny a claim within 30 days, while others say it must be done in a "reasonable" amount of time.
Homeowners insurance coverage FAQ
Homeowners insurance typically covers damage caused by specific perils, depending on the type of policy. A named peril policy covers damage caused by 16 perils, including fire, theft, and windstorm. An open perils policy covers damage caused by any peril except those specifically excluded, such as earthquakes and flooding.
Floods that originate from a source outside of the home are not covered by standard homeowners insurance. If you live in a high-risk flood zone, you may be required to purchase a separate flood insurance policy to ensure protection against flood damage.
You may need additional coverage for specific risks like flooding or earthquakes if you live in areas prone to these events. Your mortgage lender should inform you of any coverage requirements, and you can consult with an insurance broker to find the best policies and rates for your situation.
